Perhaps less attention has been paid to the
figures published a couple of days later on material deprivation (as measured
by Eurostat’s SILC
survey) in 2011. No surprise really, as ‘poverty’ is a word that makes
headlines while ‘material deprivation’ is hard to translate and sounds rather
technical.

In fact it’s the other way around; poverty
is measured using a technical and rather arbitrary definition, while material
deprivation is measured by individuals’ responses to simple questions such as
‘can you afford to buy meat twice a week/go on holiday/keep your house warm?’ If
journos only realised this, this far more dramatic dataset would be their
number one hunting ground. (For a further discussion, by a Marxist no less, see
here).

Anyway, the new figures suggest that
material deprivation in Greece went up in 2011, regardless of what dimension of
deprivation is considered. The ones I’ve
been looking at the longest are:

I started looking at the data one year ago in
response to persistent reports of Greek children fainting at school due to
malnutrition. While the first and most
famous of these reports was an over-generalisation in lieu of lobbying by
the Greek teachers’ union, many have followed and it’s safe to say that malnutrition
is a fact
of life for many of my compatriots, many of those with children. Besides,
by the time the children in a
household are having to go without food, one can be certain the adults have already
been going without for a while.

The tables below demonstrate the percentage
of households dealing with each of the above facets of material deprivation.
Worst off as you might have guessed are single parent families, families with
more than two children, and people living on their own, especially older people.

To return to the issue of food poverty, just under
one in nine households with children are finding it hard to feed properly,
twice as many as in 2007 and the highest percentage since this question was
introduced in 2003. I say ‘feed properly’ because it's not 100% clear what falls under not being able to afford a 'vegetarian equivalent' twice a week. As @irategreek pointed out to me over Twitter, this is interpreted by humanitarian aid agencies as including pulses. In a Greek context, not being able to afford these twice a week is really at the margins of extreme poverty. It’s still not the Argentine 6 peso diet, but
a good measure of what most people would think of as
really struggling to get by.

Using food deprivation as the main
indicator, it turns out that 2005 was when the Greeks lived best, a finding
that matches my estimates elsewhere.
In fact, the drop in food poverty levels in the immediate aftermath of Euro
adoption (and despite the reports and reality of persistent inflation) was
spectacular.

By way of a caveat I should say that
respondents to such surveys may be embarrassed to tell researchers that they’re
not able to afford certain things, especially if they have children, so the SILC
estimates are almost certainly under-estimates. Still, large surveys such as SILC
ask a whole bunch of questions and are not at all focused on poverty indicators,
so people going hungry will not necessarily tend to opt out altogether.
Moreover, I think it’s safe to assume that the tendency to lie about living in
poverty is not greater in Greece than elsewhere and has not become greater over
time (in fact, in hard times people may be more willing to discuss such
problems openly).

Anyway, it turns out Estonia, Malta and the
Czech Republic are countries with similar levels of food poverty as Greece’s among
households with dependent children, and this grouping holds when it comes to
large families with children. When it
comes to single parents, on the other hand, we’re stuck somewhere between
Poland and Romania.

Remember, the Czech Republic is, to me, the
best-case scenario of where Greece will end up. The worst case is Latvia,
where 29.6% of households with dependent children live in food poverty – almost
three times as many as in Greece.

Now hunger is one area where libertarians
are challenged strongly by other creeds: presumably libertarians are OK with
this and think we should allow people – worse, children!- to go hungry.

My answer is (as Greek readers will know
already) ‘no’, but for a given value of ‘we’. Using the word ‘we’ to denote
the State is, after all, a sly rhetorical tactic that has gradually injected
our discourse with statism. ‘We’, as in society, must not allow people to go
hungry, least of all children. The State could have a role in protecting life
and property, countering negative externalities and subsidising positive ones (health,
education, public infrastructures) but beyond that point it should leave poverty
to the real ‘we.’

Not that Greece’s anti-poverty policies
were ever good to begin with. According to the latest data, and the older data too,
Greece’s welfare state has for years been the worst in the OECD at tackling
poverty – in terms of how much it manages to reduce the risk of poverty per
Euro spent.But the latest study is much more
damning of the project throughout Europe: it takes the more ‘efficient’ EU
countries on average 5 times their per capita GDP per year to lift or keep a
single person out of poverty, and this multiple is on the rise.

This is amazing
as it’s many times over the sustained income that would be required for the
same person to no longer be poor. The countries making the most out of their
anti-poverty money are, amazingly, Hungary; Slovakia; Bulgaria; Czech Republic;
and Poland.

There’s a simple reason for this. The
welfare state may focus its planning on poor people, but its intermediate
output almost always tends to be middle-class jobs ‘managing’ the poverty agenda in a self-serving manner. And since the middle class is better at lobbying than the poor, they also manage to skim many of the system's transfers for themselves.
All of this is a simple, well
known feature of bureaucracies everywhere; we just happen to have become
better at it. It’s also a constant refrain in the TPA’s non-job
of the week column, a Greek equivalent of which would make the world a
better and funnier place – if any public sector job ever came with a job
description (see my Bank of Greece example here).
But there is a more insidious side to the broken safety net. As this excellent World Bank Study demonstrates. vote buying tactics are directly related to under-investment in public services that benefit the poor. OK, it's set in the Philippines, but I'd say it applies to Greece just as well.

If you want to know more about the amazing SILC survey, check out this gem I've got for you, right from the vaults of the Eurocracy. Also, if you'd like to know more about how SILC-measured material poverty matches other poverty estimates, Eurostat has prepared a very interesting overview here.

Thursday, 5 July 2012

The Right Hon. David Cameron PC MP, Prime
Minister of the United Kingdom

Dear Prime Minister

My name is Emmanuel Schizas. I was born and
grew up in Athens, Greece, and moved to London in 2005, at a time when my homeland
was growing and gaining in influence regionally. Like many of my compatriots I
came here to further my education, at tremendous unsubsidised cost as an MSc student;
I have lived in London since and in April this year I was honoured to become a
full British citizen.

People do not rise to positions of power
without some measure of intelligence. No doubt you realise I am writing in
response your recent comments,
interpreted as offering conditional support for restrictions to the flow of immigrants
or even visitors from Greece in the event of a full-scale economic meltdown.

I urge you to read on. This is no rant
about neoliberal bogeymen and how you are in fact a giant man eating lizard, no
diatribe concerning the Parthenon Marbles, no yo-mama-nomic riposte complete with
disingenuous hints at LIBOR fixing or the size of the UK structural deficit. I
am a man of facts, used to receiving and delivering criticism of my homeland;
however as Britain is now also my home I am bound to treat it, and its
Governments, no differently.

I have spent my entire career, brief as it
has been, in Britain’s policy industry. As such I believe I can guess what pressures
you are under and can appreciate your need to appease your many diverse
constituencies.

At a time when Labour’s poll lead is becoming
dangerously
wide you no doubt feel the need to plug your party’s leaks
to UKIP (ca. 11% of your 2010 vote) by appearing to be robustly Eurosceptic,
and to be sure there is nothing wrong with being sceptical of the EU institutions
or of EU federalism.

Perhaps you also wish to avoid dealing a
finishing blow to the originator
of the Government’s ‘Greek influx’ talk, your faltering Home Secretary, Theresa
May, already reeling from the botched
deportation of Abu Qatada and notoriously the second
ever Home Secretary to be held in contempt of court. It is also likely that
you need to toss the Daily Mails of
this world and their readers a bone after dismissing out of hand their protests,
for once actually justified, over the same Home Secretary’s proposals to drastically
increase the Government’s powers of surveillance over its own citizens.

You have, however, picked the wrong issue
to milk. I have read and re-read your statements and I know that they are far
less aggressive than your detractors claim; I know you have only said that you
reserve the option, provided as you believe by law, to impose restrictions if ‘stresses
and strains’ should arise. But you cannot look anyone in the eye and claim that
these statements are not left purposefully vague in order to allow Eurosceptics
to claim a victory of sorts, to allow your coalition partners to save face, and
to allow you to change course without being accused of another U-turn.

Your argument for restrictions, it seems to
me, rests on three premises:

1.There is a small but
significant probability of a Greek Eurozone exit and default leading to full
scale economic collapse.

2.A large number of Greeks would
leave for the UK if the Greek economy were to collapse.

3.The number of prospective Greek
immigrants would overstretch public services in Britain.

In
fact, all three premises are severely flawed.

1. There simply are not enough would-be
migrants from Greece to pose a serious problem to Britain. As reviews
of post-enlargement immigrant flows have suggested, migrants in mass
migration waves tend to be young, male and medium- to highly- skilled. There
are about
3.7 million Greeks of either gender between 20 and 45 years of age, of whom only
3m are economically active (including the unemployed), and of whom only
2m have mid- to high- level qualifications. A third of those would have
jobs even in a collapse scenario, leaving us with about 1.3m eligible migrants.
If these were to be distributed not according to the economic prospects of host
nations (see below) but according to the Greek people’s stated preferences for places
to work, Britain should receive some 31% of
this total, i.e. 300,000 people. Britain currently hosts just under 6.5m migrants, who
on average fare better
in the labour market than UK-born individuals. Even if somehow Greece collapses,
you need not fear that a horde of hairy garlic eaters will descend upon your
shores.

2. Immigrants fleeing an underperforming economy
do not flock into a faraway one experiencing a mild recession when other
economies closer to home are growing. There is no reason to believe Britain
would be overwhelmingly preferred on any basis. To give you an example, during
the last UK recession (2007-09), immigration to the UK from the hard-hit
countries of Eastern Europe fell
by 33%, against only 9% for immigration from other countries. Ireland saw a
similar but much steeper trend. Successive UK governments have cited falling
inward migration as evidence that their policies are working; in fact this is
simply evidence that the UK is becoming a less attractive place to live. Yes,
language is a barrier and most Greeks speak English – but French and German are
also common.

3. While Greece may be headed for some
apocalyptic endgame, the amount of political will invested in keeping us in the
Eurozone is enormous. The probability of a voluntary exit is, until the next
elections at least, very low as both the majority
of Greeks and the new Government want us to stay in the Eurozone. In fact,
given the European tendency to conveniently ignore the EU treaties when
necessity calls (remember the no-bailout
clause 125 anyone?), I wouldn’t be surprised if a formula is found to allow
Greece to impose capital controls while remaining a Eurozone country.
Similarly, with most of our debt now in the official sector’s hands, i.e.
burdening the EU taxpayer, Greece cannot be allowed to default – there will be
renegotiations upon renegotiations.

Finally I do not believe that your own
citizens, even those with no ties to Greece, will look kindly on balance on a
move to restrict the movement of people from Greece to the UK. Your
Universities will suffer, as will employers and landlords in every major UK
city – but none more so than those dealing in London’s prime
real estate, in say Kensington or Marylebone, which have witnessed a true
Greek invasion – an influx of money in search of a safe haven.

I believe that even now you have a chance
to set the record straight and repair some of the damage you have done to
Britain’s reputation.

I therefore urge you to go on the record,
within the coming week, as saying three things that I know you believe:

·Greeks are as welcome to visit,
settle and work in Britain as any other EU citizens

·Britain sees the free movement
of people, goods, services and capital as the biggest benefit from EU
membership and will not jeopardise it.

·Britain can deal with the
levels of migration resulting from a Greek collapse under most reasonable
scenarios

Do the right thing, Prime Minister. Make me
proud of my adopted country.

PS. David Cameron's office invited me to connect on LinkedIn a couple of months ago. This is now coming in handy as I can deliver this letter in person.

Sunday, 24 June 2012

I made these, but feel free to make your own by clicking here. Disclaimer: I am using Uganda as a baseline; I've no idea where Skeptical Third World Kid, now an internet meme, is from. Please submit your own in the comments section below. Best caption wins something or other.

Pls do all your hatin in the comments section where I can ignore it as I fully intend to.

Thursday, 21 June 2012

After months of struggling with crappy internet connections, I've finally managed to get on to RT's Capital Account, produced by my friend Dimitri at @CoveringDelta. The topic was the nuanced political and economic life of Greece that doesn't fit standard ideological frameworks. I must admit, even if you don't know the tremendous amount of internet epic failz that preceded this, it's come out exceedingly well. If you do want to know though, suffice it to say at some point I was working through a bridged connection involving my phone and my laptop.

Without further ado, here is the show for you enjoyment. Please show you appreciation by tuning in to the Capital Account, which also features interviewees much more famous and important than myself:

Thursday, 7 June 2012

Readers will, by now, have read the famous blog post by @sturdyalex in which it is claimed that, far from being lazy, Greeks are the hardest-working people in Europe. Veteran readers will know I have considered the factual basis of this argument here and here. However, not only has the piece gone viral since then, it's also resurfaced in this review on the New Statesman, reaching a whole new, and more opinionated, audience.

To forestall some of the strongest objections, I share Alex's disgust at the stereotypes and pseudo-anecdotes flying around and exploited for populist reasons abroad. I believe, as I've stated elsewhere, that the Greeks are intrinsically no better or worse, harder-working or lazier, than the Swedes, the British, the Germans or the Zimbabweans. I assure you that revisiting the data properly confirms this. Insofar as Alex's argument debunks the myths being peddled about us Greeks, I am fully supportive.

However, people's reading of Alex's data is becoming increasingly warped, and leaves some commentators wondering how such hard-working people are lagging so far behind in unit output. More to the point, it reinforces the wrongheaded view that Greece's labour market is not deeply dysfunctional and in desperate need of reform. Hence I need to revisit my original commentary and aim for a wider audience.

I will, furthermore, not rely on arguments such as 'yeah but look at productivity', which, while valid, essentially only serve to kick the ball into the long grass. I know that an hour spent sitting at a desk playing Spider Solitaire is not the same as an hour spent making stuff people will pay to buy, but I'm not sure one corresponds to Greeks and the other to Germans, and that's not our point right now.

No, my point is that the OECD data Alex relies on are deeply flawed and unsuited to international comparisons. If looked at in detail, they tell a very interesting story, just not the one some of Alex's readers would like.

You see the OECD figures do not compare like for like. They lump part-time and full time employees together without any adjustment so countries with a larger percentage of part-time employees will tend to have fewer average hours to show for it. As this OECD table will show you, part-time employment is very rare in Greece. To take the example most likely to raise eyebrows, 22% of German workers worked part-time in 2008, against 8% in Greece.The OECD also lumps together female and male employees, so any country which manages to get more women into the workforce also has fewer hours worked to show for it because women typically worker fewer hours. For background, only 56% of Greek working age women were economically active in 2008, against 71% of German working age women (source). Account for that, and for all the other ways in which the two labour forces differ, and, well, it gets complicated.

There are many simpler ways of getting the overall picture but the simplest is to compare like-with-like. A full-time male Greek employee to a full-time male German employee, and likewise for women and non-employees (proprietors, the self-employed, family members working for businesses, more or less anyone without an employment contract). I'll stick to German and Greek employees, partly because it's sensational to draw this comparison and partly because comparing Greece to all possible EU countries will make my tables way over-complicated.

I can draw this comparison in particular because the OECD data on European countries are more or less directly comparable as they are derived from the pan-European Labour Force Survey. As a passing glance at the OECD matadata will reveal, comparisons with non-European countries are actually not valid at all and the OECD discourages users from using the data in this way. The reason is that some countries use administrative or workplace-based data as opposed to the LFS' employee-reported data, which tends to underestimate hours worked (read here for a full review).

So, comparing full-time employees with a formal employment contract in 2008 (the reference year Alex uses), Greek men work only 2% more hours than their German counterparts, while Greek women work 1% less than German women (all figures in hours worked weekly below). Full-time non-employees in Greece, both male and female, work 3% fewer hours than their German counterparts. Part-time female employees in Greece only work 7% more hours than their German counterparts. (Data here, or see table below, which you can also download from here)

So that's the whole of the mainstream, more productive, labour market in a nutshell. The difference in hours worked on a weekly basis is nowhere near the staggering 48% implied by the OECD figures that Alex cites.

So what accounts for the difference in hours worked? For the most part it's the structure of the labour market. Fewer women and part-time workers in Greece, and a substantial fringe of workers that don't fit the traditional model of work.

The latter are very important. They are mostly part-time male employees, part-time non-employees of both sexes, and people with second jobs (data on those here). That's precisely the segment of the labour market that is shut out of fully-regulated work, not least by employment regulations. It's the kind of work, may I add, that our unions are, to this date, trying to regulate out of existence. Here, the difference is absolutely huge. A Greek man with a second employee job, for instance, works about twice as long as their German counterpart. Given the lower productivity in Greek workplaces, keeping working hours in mainstream jobs artificially low through employment regulation is not doing anyone any favours. A simple reading of Alex's data would suggest nothing's wrong. But there is plenty wrong.

There is much in this data that the European Left could use, if only they bothered to. The reading above is just one libertarian point of view. Getting to the bottom of why the Greek labour market includes a fringe working its metaphorical hairy knuckles to the bone is essential to understanding our plight. Unfortunately it doesn't play to the preferred narrative of evil neoliberals trying to talk the proud, untamed Greek worker down. Well the data aren't playing ball. What's it going to be, friends? Change the narrative, or manipulate the data? Do you want to win a flamewar, or do you want to understand the shit we're in? I'm not keeping my fingers crossed.

Bonus for returning readers: funny things happen when you compare like-for-like. Here's the evolution of average weekly working time for male full-time employees in Germany and Greece from 1983 to 2011:

And here is the same graph for full-time female employees:

UPDATE:

I've now finally been able to get the full European Values Survey dataset for all of Europe, which allows me to look exactly at what Greeks (and others) wanted from a job as of 2008. The full table (weighted data of course) can be found here. It shows that a greater share of Greeks than Germans want family-friendly jobs with low pressure and good hours, but a smaller share of Greeks than Germans needs jobs security. These comparisons were consistent even after filtering for only young people (34 or younger) or filtering for only unemployed people.

Is this conclusive? Well, much depends on what Greeks and Germans respectively call 'low pressure' and 'good hours'. I've partly divided the sample by old and young, employed and unemployed precisely to see if that makes a difference to perceptions. On balance I'd say the figures are a good enough indicator, but feel free to question below. Then there's the question of whether it's the Greeks or the Germans that are an outlier.

Also note that running figures by 'respondents' as opposed to 'responses' makes a big difference. In some countries, people focus on a few 'important' attributes of a job, while in others they cast a wide net. I will address this in an update soon.

Thursday, 24 May 2012

As some readers know, I have a special
place in my stony neoliberal heart for Techie Chan, the Greek Left’s resident statpornographer.

He doesn’t blog in English (by choice probably) but the very few Greek tweeps
who don’t know him had better check him out. He’s even kind enough to humour my
tweeps and me when we joke that Techie and I are actually the same person
arguing both sides of the debate for kicks.

In his post on this subject, Techie
cites Greek
banks’ loan to deposit ratios of 100%-120% (actually an average of 101%) as proof that they got
themselves into the mess they’re in, claiming that 80% is the benchmark for
sustainable leverage. Actually, as the following graph (originally from
Zerohedge here)
demonstrates, Greek banks were not particularly trigger happy by global
standards. They were about average, and Techie's 80% benchmark is about two-thirds of the way down the distribution.

And mind you this is after a wee bit of deposits flight too.

Now, I will happily grant Techie that banks
the world over are over-leveraged (read on as to why, though!) but it is a big
of a stretch to claim that Greek banks deserved to go under on this basis when
not so many of the rest of the world’s banks have. This first part of my
argument is actually quite simple. With lenient markets, such as we had up to
2007, the optimal level of bank leverage is determined by earnings growth, and that was not half bad for Greek banks. With
tight-ass markets, the kind we actually have now, the real issue is the degree of
reliance on short-term wholesale funding. So did Greek banks rely
disproportionately on short-term wholesale funding? Well not until they got into trouble, with exceptions of course.

The second part to my argument is slightly
more technical but much juicier. You see, what Techie forgets (and most people
completely ignore) is that leverage is not fungible. It’s more like Popeye’s spinach
– Popeye eats it and it all ends up in his freaky-looking arms instead of
making him all-round super-buff. Similarly, a bank’s 20x leverage does not finance
all of its assets equally; rather, capital requirements courtesy of Basel
implicitly assign a maximum leverage ratio to each assets class through risk
weighting, and therefore decide where the leverage goes. I know the banks don’t
think this way when they borrow to cover financing needs, but that’s how their
incentives are aligned; they can’t help it. Former World Bank Director Per
Kurowski illustrates this very well in his
most recent paper on how Basel has turned banks into weapons of mass
destruction.

You see, all the way to early 2009, Greece’s
credit rating – an incredible, and, as it turned out, unrealistic, AAA to AAA negative for all agencies,
meant positions on Greek bonds could be financed through UNLIMITED leverage according
to Basel II regulations. Treatment under Basel I, the previous regime, was
similarly lax. So really, it was no surprise that they tanked as soon as the
finances of the Greek state came into question.

Monday, 21 May 2012

On May 21, the excellent English version of Kathimerini ran an article on the flagging fortunes of liberal/libertarian parties in Greece. The author, Harry van Versendaal (@denk_ik), was kind enough to send me a set of questions in the run up to its publication. What follows is the full set of notes that I sent Harry. I am grateful that, as you will see, he has quoted both faithfully and liberally from the original. I am publishing the full set here because, with the Democratic Alliance joining forces with mothership New Democracy and Drassi and Dimiourgia Xana also joining forces, I feel it is more topical than even when it was originally written.

Be sure to check out Harry's follow-up article, Tweeting to the Converted, a very astute observation on the workings of the Greek Twittersphere.

What are the reasons behind the poor appeal of liberal parties in Greece?

I am not sure just short of 8% under these conditions is a sign of poor appeal in itself. It's fair to say there aren't many liberals or libertarians in Greece in the first place. When I last tried to take a stab at the total figure, it was about 17% of the electorate. There are many reasons I've heard as contributing to this but for me there are five major points.

First, the liberal parties are in the business of pointing out tradeoffs; telling people they can't have everything. That's been a wildly unpopular way of thinking in Greece since the Change of 1981 and increasing more so. In 2008, when asked by the European Values Survey to choose where they lay on the left/right spectrum and the freedom/equality spectrum (a kind of simplified Political Compass), nearly half of the representative Greek sample refused to make one or two of these choices. Liberal parties struggle to reach these people and indeed it's hard to reach them with a proposition that is not populist or clientelist.

Second, the liberal parties appeal to a sense of ownership and responsibility that much of Greek society has been losing for some time. It's hard to argue with 25-year olds about the need to uphold legitimacy because they've been sealed into disenfranchisement at the fringes of the two-party system and regulated out of the labour market by the unassailable voting bloc of their parents' generation. Remember, the median age in Greece is 42. The median voter is even older and will continue to become so.

Third, the liberal brain drain is even more intense than the overall Greek brain drain. By virtue of both their backgrounds and mindsets, liberal voters are more likely to immigrate, and have been doing so in droves even in the good old days. The once major parties never bothered to give expats the ability to vote in their country of abode, as the subsidised industry of election tourism gave them yet another clientelist selling point. Note that all of the liberal parties (though not all of their voters) have called for facilitating expat votes in their programmes.

Fourth, like capitalism, liberal ideologies in Greece have been defined by their opponents, not their supporters. We've allowed others to tell the Greek population what we are, what we believe, who we are aligned to. There is no Greek word for 'libertarian'. People don't even believe such an ideology exists, except perhaps as a front for corporatism. In fact, you are most likely to be called a 'neo-liberal' instead; a catch-all phrase that essentially encompasses everyone statists on the left and right dislike. Essentially, if you call yourself liberal, the reasoning goes, you are pro-war, pro-monopolies, corporatist, unfeeling and uncaring, and have a casual tolerance for corruption, inequality and the supression of political rights.

Finally, there comes a point on the road to serfdom (I guess) where so much of a country is dependent on government subsidies, government-sanctioned rents and government-upheld false economies, that liberalising it will simply kill it. If the entire patient is gangrenous, of course amputation doesn't work. I don't like to think that Greece has crossed that line yet, but it's closing on it. It is very hard to implement any liberal policies, at least in the economy, without materially worsening the lives of hundreds of thousands of people, at least in the medium term. In an aged and inflexible society such as ours, people don't bounce back from such setbacks; they stay down.

Would you say there's a problem with the ideas/policies put forward by those parties, or with the people who represent them?

There is certainly a major problem with the audiences they have chosen for themselves. Drassi, for instance, would probably see themselves as the 'orthodox' libertarian party in Greece and are denounced even by many in the liberal space as haughty and elitist - predictably, they tanked outside of the major cities and draw a disproportionate share of their supporters from the alumni of elite schools. Their allies, the Liberal Alliance, only register in many people's minds as a pressure group for gay and other minority rights (which even among some self-described liberals is a big no-no).

Dimiourgia, Xana! have, on the other hand, invested a great deal in the notion of 'politics without politicians', which is very attractive to voters everywhere but surely a self-defeating ideology once they get a handful of MPs into parliament, The immediate side-effect of this approach, however, is that they have drawn alongside traditional liberals a kind of pro-Europe, pro-business protest vote; the latter is made up of people who are hostile towards established liberal politicians. Don't get me wrong, creating a credible pro-business, pro-Europe outlet for the protest vote is an enormously important innovation that Greece really needs. But it makes it harder to form alliances. I should add that Dim Xan have also alienated some liberal voters by taking positions on things such as immigration and education that are nationalist at best, as well as some corporatist positions on the economy. But if we cross out DimSim's clientelist reserves, they are in fact the largest of the liberal parties, despite never having been in politics before.

Then there is Dim.Sim., which is a more complex party to describe. Dimsim owes a very large share of its vote to the traditional voters of Dora Bakoyanis' family, including herself, her father and her late husband. If we're being charitable it would be best to say that not all of them care about liberal this and liberal that; they have a personal loyalty. In fairness, it's hard to argue Bakoyanis is not a liberal politician, or a worthy one. She is entirely formidable and did, after all, stake her political career on a principled and pragmatic pro-bailout vote back in 2010.

Greek liberals are keen to advertise their pragmatism, yet liberal parties failed to cooperate ahead of elections. What were the reasons for this, in your opinion? Would you like to see them work together in the future?

The three (four, counting the Liberal Alliance) liberal parties have approached the matter of coalitions in a manner that is frankly insulting and doomed to failure. Their reasoning is: 'we three (+1) have our love of Europe, reforms, enterprise and fiscal discipline in common; we must pool our voters under one leader and ensure this perspective is represented in parliament. Now, let's find a leader.'

Except of course the voters are not theirs to pool, and the supposed 'common ground' is trivial: Pasok, ND, Dem Left and a whole bunch of other parties guaranteed to stay in Parliament also claim to be pro-Europe, pro-reform, pro-fiscal discipline, even pro-business in some cases. The liberal parties have never tried to develop a potential common policy platform and are instead focusing on horse-trading among themselves. It's not a coincidence that while everyone speaks of a liberal political 'space' (i.e. captive voters), they have not attempted to put the question of collaboration to this constituency.

If they can change course now and call on their supporters to discuss and approve a common platform (Dim Xan has shown some remarkable skill at managing this process) then there is hope for the liberal parties. In fact, I think their 8% could grow substantially as the two major parties, especially PaSoK, continue to disintegrate. Of course I worry about the quality of new voters we will attract but that's mostly my prejudice.

But if they insist on horse-trading, I will be hard-pressed to vote for whichever coalition of liberal parties emerges. Think about it this way - the point should be representation, not the election to the house of a set of 'tribal' MPs. If an MP owes their job to a cobbled-together coalition of liberal parties which in turn owes their toehold on government to a cobbled-together coalition of pro-European parties their need to represent their voters is minimised because it's not them that got them into power. The balance of power in the voter-MP relationship becomes hopelessly skewed. Syriza managed this well with their own constituent groups, but then again they managed it well for as long as they were in opposition. It's not a structure that remains very democratic once one is in power.

Some critics say liberalism is a deeply misunderstood notion in Greece. Do you agree?

I think it's fairly misunderstood everywhere. Statism is a powerful narrative; when bad things happen, a hero must swoop in and save the day. But in Greece in particular, liberalism is defined by connotation and association more than by its actual programme, because it's never had one overarching programme. As long as we're the pro-banker people, the pro-gay people, the pro-bailout people, the pro-privatisation people, the anti-minimum-wage people, we are easy prey

Saturday, 19 May 2012

Some time ago while trying to get to the bottom of how big the Greek public sector really is, I made the point that electorates will only tolerate larger public sectors if they are efficient. This is not a political point: it's a statement about voting behaviour. In the long run, voters will not long tolerate a state that wastes their money, and rational voters will only pay for public spending if the returns to public spending are good relative to those of private investment.

First, they do it by punishing governments with a recent record of over-spending. Second, they undermine the tax revenue of inefficient governments by either evading/avoiding tax or joining the informal sector through informal work or enterprise, forcing them to either cut down on spending or run deficits. Third, the low levels of public capital accumulation produced by misdirected spending result in sluggish economic growth and hence higher unemployment and lower government revenues in the long run; so even if they can't directly see the source of this malaise, voters who hate unemployment, economic stagnation, and burgeoning deficits will punish politicians for it.

The last two mechanisms are quite important actually: government inefficiency will tend to undermine government revenues and create deficits on both ends. People should remember this when they say that it was Greece's tax revenues that were too low, as opposed to public spending being too high. Actually inefficient public spending damages both deficit drivers. All of this adds up to one thing: public spending can only rise sustainably in the long run if it's backed up by rising government efficiency. At the urging of @paslanid I've collected some data to back this claim up, and incidentally I've got some surprising insights for you. Sources are the WEF's Global Competitiveness data and Eurostat's annual public finances data.

The first insight from the above is that small, efficient public sectors are not to be found where you might expect. Iceland and Norway, Estonia and Luxembourg, and of course Germany are not known for libertarianism but they manage to run a tight ship without a massive state. Britain, which many in Greece think is America-light, is actually a fairly big state and not terribly efficient. Same goes for Ireland, actually, although rising unemployment in the past years will no doubt have pushed primary spending up a lot further than expected.

The second insight from the above is that perceptions of public efficiency can change dramatically when a country is under pressure: perceived efficiency levels could explain the size of the Greek state in the good old days - 2005-2008 - or at least why the electorate tolerated such a large state. But of course with government lying to us about its spending and many people (even in, or perhaps especially in, our corporate and academic elites) having made peace with the terrible inefficiency around them, it's not clear how accurate early perceptions were. It certainly doesn't help that in the meantime public investment has been cut savagely, rebalancing spending further towards public consumption.

But most of all the data bear out the general hypothesis that inefficient public sectors are unable to stay very large for very long. Do you want a big state? Then you should be busting your balls to make it more efficient. I won't support you but the average Joe will. So why is no one in the big government camp arguing for more efficiency? Sure it will mean firing some public sector employees in the short term but it will probably mean that more can get hired in the long run.

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